As U.S. consumer spending mirrors the broader malaise of the U.S. economy, now is not the time to bet on Retailers.
Since the July 2015 peak, the retail sector has continued its slow slide and is now flirting with full-blown crash mode. Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers this morning:
"Not surprisingly, the US Consumer gets that they get the bill when US Growth Slows (Down Dollar = Tax on Real Consumption) and now the US Retail Sector (XRT) which has been a Best Idea in our Macro Themes since Q3 of 2015 is moving toward #crash mode at -18.3% since July 2015."
(In case you missed it, click here for our current big Macro theme investment conclusions referenced by McCullough.)
Leading the losers today is Kohl's (KSS).
(Note: KSS happens to be on Retail analyst Brian McGough's Best Ideas Short list.)
As McCullough wrote in today's Early Look:
"Not to pick on Kohl’s (KSS), but now that LINE is a bagel, I have to pick on something with market cap. KSS missed the top-line (same store sales were DOWN -4% year-over-year) and EPS came in at $0.31 vs. an Old Wall “expectation” of $0.37/share."
... He continued with this final cautionary note on KSS:
"Ah, but 'it’s cheap.' Yep. Getting cheaper.”